We are getting to the pointy end of the US presidential election and markets are now focusing on the potential implications of policy differences.
One area where there are significant differences between Trump and Harris is tax and fiscal programs. In the chart below, which calculates the cumulative effects of campaign proposals for the 10-year period 2025 to 2034, we see in graphic form some of the major differences and the implications for the US National Debt.
Quite clearly, Donald Trump’s campaign promises would send the national debt soaring faster than Kamala Harris’ would, per this analysis from the Penn Wharton Budget Model. But both of them increase the deficit relative to the current baseline over the next 10 years, Trump by $5.8 trillion and Harris by $1.2 trillion.
Does it matter? When the government gives money to individuals and businesses, as both candidates propose, that’s good for the recipients and broadly good for economic growth, but it also accelerates the growth of the national debt, which is already at worrisome levels.
If the policies are scored using “dynamic pricing” that reflects increased tax revenues from proposals that increase economic activity, the gap shrinks a little, with Trump’s promises costing $4.1 trillion to Harris’ $2 trillion.
The biggest difference is the question of what happens to Trump’s tax cuts, which are due to expire at the end of 2025. Trump would extend them; Harris wouldn’t.
- Extending the individual income tax cuts would cost $3.4 trillion over 10 years; doing the same for the corporate income tax cuts would bring the total to over $4 trillion.
- Trump wants to cut the corporate income tax rate from 21% to 15%, at an estimated cost of $600 billion, and abolish the income tax on Social Security benefits, which would cost another $1.2 trillion.
On the other side: Harris wants to increase the corporate income tax to 28%, which would raise $1.1 trillion for the public purse.
- That’s more than enough to pay for the cost of increasing the child tax credit to $6,000 for newborns; for expanding the earned income tax credit; for extending the tax credit that currently exists for health insurance premiums; and for providing down payment support for first-time homebuyers. Between them, those policies would cost about $600 billion.
- Harris has another very large proposed expense, which is raising the child tax credit to $3,000 for children over 5 years old and $3,600 for children aged 5 years and younger. (It stands at $2,000 and is set to drop to $1,000 in 2026.) That policy would cost $1.7 trillion over a decade.
The Wharton study concludes that the Trump proposals would increase the national debt by 9.3% above its current trajectory by 2034 and by 12.7% by 2054. The equivalent numbers for the Harris proposals are 4.4% and 7.7%, respectively.
The top 1% would see their post-tax income rise by $47,000 in 2026 under Trump, compared to a fall of $9,000 under Harris. The median household would see an income gain of about $2,000 per year under both plans.
Of course, these are simply pre-election proposals. Plans can change, be negotiated down by Congress, be abandoned, or simply disappear. But the likelihood is that whatever the outcome, the US national debt is highly unlikely to reduce anytime soon.
Source: Axios, Penn Wharton Budget Model; Jacque Schrag
